Incentive-based Governance of the Swiss railway sector : a study of the performance incentives created by the financing of the railways

The question of how the Swiss railway system should be organised and financed has been debated in Switzerland for over the past 20 years. Parallel with, but independently from, the debate in the European Union (EU), Switzerland has sought to make its railways financially more sustainable while at the same time ensuring that its performance stayed at its current high level, and was even improving, where possible.
The purpose of this study is to contribute to the present debate, yet on a more fundamental level. In particular, we offer a more conceptual analysis, grounded in new institutional economics, of the relationship between the way the different parts of the Swiss railway system are financed on the one hand and the overall performance of the sector on the other. Our broad research question is as follows: how should the Swiss railway sector be financed in order to achieve the highest possible level of performance? On the whole, we have found that in important respects the relationship between the design of the financing mechanisms used to fund the Swiss railway sector and the performance of that sector creates incentives that are weaker than what would be optimal. The law and practice of the current Swiss system will be described in chapter 2, followed by a discussion of the law and practice in comparable other European countries in chapter 3. In chapter 4 we will introduce the specific performance goals we are using for the purposes of our analysis. Chapter 5 is devoted to the core of our study, namely the mapping of the current situation, followed by an evaluation of various proposed reforms in chapter 6. Chapter 7 concludes and offers some recommendations for the future.